An Early Bet on SpaceX Led to a 30% Gain for This College Endowment

SpaceX signage during the closing bell ceremony at the Nasdaq MarketSite in New York, on June 12. Photo by Michael Nagle /Photographer: Michael Nagle/Bloo

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(Bloomberg) — The University of North Carolina’s endowment management company made an initial investment in SpaceX more than 15 years ago.

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Early wagers through venture capital in Elon Musk’s rocket company have helped turbocharge its endowment returns to more than 30% this year, according to a person familiar with the matter.

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It has helped make UNC’s endowment one of the best performing in the US, but it’s also emblematic of how a select group of US universities have profited from a surge in value from early-stage investments.

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Endowment funds with more than $500 million returned a median of 18.9% before fees in the year ended in June, according to Wilshire Trust Universe Comparison Service. The University of Michigan’s endowment, an early investor in OpenAI, is also expected to top the median.

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“You either have those names that blew up in a big way or you don’t,” said Michael Rush, a Wilshire senior vice president.

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While endowment gains are the highest in the last 10 years except for 2021, the performances vary widely, according to Wilshire. SpaceX’s record-breaking initial public offering on June 12 is giving a big boost to funds that invested more than a decade ago. While SpaceX has a more than $1.5 trillion valuation, shares have fallen below the $135 a share IPO price, closing at $114.92 on Thursday. 

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For universities that were invested in tech and energy, the strong returns could ease some of the financial strain from threats to their federal research funding, a shrinking pool of students and muted performance from private equity. Returns at large funds ranged between 14.5% to 20.5%, Wilshire data showed. All endowments returned a median before fees of 12.7% for the 12 months through June. 

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Individual schools will report their performance starting over the coming weeks and months.

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Betting on SpaceX

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University of North Carolina Management Co. had almost $15 billion under management as of March 31, of which the campus at Chapel Hill’s endowment accounts for almost half. The endowment gains will be shared across the state with the other schools in the UNC System and entities the nonprofit fund manages money for such as UNC Press and Winston-Salem State University.

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UNC’s endowment placed only a few million dollars in a fund that invested in SpaceX initially, and sold about $1 billion before the IPO, according to people familiar with the matter. The endowment still holds more than $1 billion in SpaceX. The school declined to comment. 

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University endowments are investors with long time horizons, and venture capital investments like those in SpaceX can take decades to realize large gains, said Max Chapman, a former chair of the board of directors of Chapel Hill Investment Fund.

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“You make five or 10 investments and hope one of them will work,” said Chapman, who also attended the school as an undergraduate. “This one has worked very well.”